EBook demonstrating the importance of your firm's culture in compliance. It's not just your actions anymore, it's your corporate culture as well.

1. For Regulators,
It’s Not Just Your
Actions Anymore.
It's your corporate culture as well.
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2. Focus on a Culture of Compliance
FINRA has identified firm culture as an exam priority and
has recently reemphasized that point in its planned targeted
examinations. It is now the put up or shut up moment. Is your firm’s
leadership making compliance and supervision issues a top
priority? If not, you should expect FINRA finding a problem with
your firm’s culture.1
Joshua Horn, Securities Compliance Sentinel
$300 billion – Fines and litigations costs related to cultural
failures since 2010.2
FINRA
1
Joshua Horn, “Firm Culture; What is it and Why Does FINRA Care,” Securities Compliance Sentinel, February 29, 2016; 2
FINRA, “Establishing,
Communicating and Implementing Cultural Values,” Targeted Exam Letters, February 2016
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3. According to FINRA, Compliance
Can No Longer Be Skin Deep
“You can’t effectively manage your conflicts of interest if
you’re not focused on your culture.”1
FINRA Chairman Richard Ketchum
… rather than asking to see compliance to-do lists
checked off, regulators are seeking broader
demonstrations of compliance culture.2
“Creating an effective compliance program requires
companies to go beyond a list of written rules.
Leaders need to understand the factors that influence
employees to behave ethically or unethically to prevent
unethical behaviors from endangering a company.”3
Nate Dvorak and William E. Kruse, Gallup
1
Wall Street Journal, “Compliance ‘Culture’ – A Timeline of Regulators’ Comments,” Risk and Compliance Journal, February 5,
2016; 2
Caron Carlson, “Compliance Culture: FINRA Shifts Regulatory Focus,” TechTarget; 3
Nate Dvorak and William E. Kruse,
“Managing Employee Risk Requires a Culture of Compliance,” Gallup Business Journal, March 29, 2016
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4. Compliance Must Extend from the Ground Floor to
the Boardroom
Board and senior management should set
appropriate “tone at top” with respect to:
• Culture of compliance
• Defining company values
• Defining corporate strategy
• Defining risk appetite1
1
David F. Freeman, Jr., Kevin M. Toomey, “Overview of Emerging Regulatory Expectations on Bank Conduct, Culture, Governance, Arnold & Porter,” March 31, 2016; 2
Wall Street Journal, “Risk Culture: More Work Needed from Board in Financial
Services,” January 5 2016; 3
Joanna Belbey, “Wall Street Regulator Examining for Culture of Compliance,” Forbes, February 24, 2016
“…40% of boards at global financial services
organizations have more work to do establishing
and embedding the risk culture of the enterprise and
promoting open discussions regarding risk.”2
Edward Hida, Deloitte Advisory Partner, Deloitte & Touche
“Banks should look at culture, and achieving
consistent behavior and conduct aligned with
firm values, as key to strategic success, rather than
a separate work stream or add-on process to
respond to short-term public, regulatory, or
enforcement priorities.”3
Joanna Belbey, Forbes
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5. What FINRA Is Looking for
1. Develop clear cut policies that define cultural values. Involve the
Board. Take steps to promote or enhance a culture of compliance.
2. Create processes for senior management to establish, communicate
and implement your firm’s cultural values. Encourage middle management
to adopt these values.
3. Create processes to identify violations, address them, and escalate
when needed.
4. Identify and address subcultures within the firm that undermine
the culture of compliance.
5. Use compensation to reward good behavior and penalize bad actors.
6. Reinforce adherence to the culture of compliance through
promotions, compensation and other rewards.1
1
Joanna Belbey, “Wall Street Regulator Examining for Culture of Compliance,” Forbes, February 24, 2016
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6. 6
Steps to Maintain a Culture of Compliance
• Share with your staff relevant articles and reports about U.S.
and global compliance issues.
• Formally train your staff with an appropriate regulatory
compliance training, such as those from American Bankers
Association and other organizations.
• Learn from best practices of your peers and competitors.
• Consult with outside experts about tools and processes to
keep you ahead of the compliance curve.1
1
Robert Half Management Resources, “Regulatory Compliance: How to Help Your Finance Team Stay Up to Date,” April 2, 2015
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7. Access the Tools that Pave the Way to Compliance
Call to learn more about simplifying compliance with Compliance Surveillance technology from EAI.
• FINRA- and SAS 70- ready rules
• Tailored reports like the 36-Month Mailer and
Patriot Act report
• Direct integration with all data
• Automatic flagging of non-compliant or
unsuitable transactions
• Separate workflow for flagged trades
• Comments and extra review on
questionable trades
• Agent registrations, continuing education and
personal account tracking
To learn more, call 503.644.3057 or visit eaiinfosys.com
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